7 Expenses That Are Keeping You In Debt
 Posted: August 21, 2009 11:36AM by Erin JoyceFiled Under:
  In the United States, 43% of families are spending more than they earn each year, according to MSNMoney. At the end of 2008, the average American household that had a credit card was holding nearly $11,000 worth of credit card debt. With numbers like these, living with debt seems unavoidable and paying it off seems like an uphill battle you are destined to lose. However, if you are interested in living debt-free, here are seven expenses to watch for that may be holding you back from being in the black.
- Not Knowing Your Limits
The Financial Times recently reported that U.S. banks are set to earn $38.5 billion this year from overdraft fees alone, more than double the number from 1994. If you don't know how much is in your bank account, you could easily withdraw or spend beyond your limit or have a check clear that takes your balance below zero. When that happens, banks charge anywhere from $5-$10 in overdraft fees. And that's not all. If you fail to pay back the amount you've overdrawn, you could be hit with even more fees after a set number of days in the form of a large sum (as high as $35) or a daily tariff (often between $5-$10). According to theNational Consumer Law Center, the average overdraft fee is $34.65, and considering a purchase as small as your morning latte could put your account in the red, that's a hefty price tag.
Credit cards fare no better, with late payment fees increasing as well as charges for going over your limit. According to a survey done by the Pew Safe Credit Cards Project in March 2009, 92% of credit cards had a fee for exceeding the credit limit, including 100% of student cards. The over-the-limit fee and the late payment fee were both $39 for most accounts. Also, these infringements can result in your interest rate skyrocketing up to 30% or higher. In fact, that same survey found that 93% of cards allow the issuer to raise any interest rate at any time. And once that rate goes up, it is unlikely to come down. (Find out more in Expert Tips For Cutting Credit Card Debt.)
- Fees, Fees, Fees
Banking and fees go hand in hand. But there are ways to reduce the charges you pay on a regular basis. First, make sure all of the accounts you have open are absolutely necessary. Consolidating multiple checking or savings account could add up to monthly savings of $20 or more.
Also, make sure you understand what and how you are being charged. Some accounts advertise as being free, but in order to have the monthly charges waived, you may need to fulfill some conditions including but not limited to a minimum balance, not exceeding a set number of transactions per month and/or having a set number of direct deposits or automated bills associated with that account.
Transaction fees can also add up quickly. Remember, if you withdraw money from an ATM instead of your bank, the average $1.50 fee is charged both by the cash machine AND by your bank. Likewise, most banks include a surcharge on email money transfers. Keep an eye on your account and make sure you know how much these conveniences are costing you. (Learn more about lowering your costs in Cut Your Bank Fees.)
- Paying The Minimum
Approximately one in six families with credit cards pays only the minimum due each month, according to an Experian national score index study. You've probably read everywhere that this is financial suicide, but let's take a look at what the actual damage would be.
The average interest rate on a credit card in the U.S. is 11.2% according to bankrate.com. However, with this kind of payment history, and one-third of credit card holders paying between 20-41%, let's guess conservatively that this family's interest is around 20%. The minimum payment is usually around 2% of the total balance, so in this case that would be about $220 per month. If only that minimum is paid, the debt would be paid off in nearly 77 years, with a total of more than $52,000 paid in interest. Push that interest rate up to 30% and the minimum payment is insufficient to ever pay down the debt.
- Credit Card Cash Advances
You know that getting a cash advance from your credit card is a bad idea, but we'll all been in an unforeseen situation where you need cash fast. So what does this convenience end up costing you? According to CardWeb.com, the fees ten years ago were on average 2% of the amount advanced with a $2 minimum and a $10 maximum fee. Unfortunately, today that number has gone up to 3% with a minimum ranging from $5-$15 with no maximum fees. Add these fees to the transactions fees you might be paying and you'll be shocked to see the total amount that disappears from your wallet each month on convenience fees alone. (Read more in 6 Major Credit Card Mistakes.)
- Payday Loans
This expense may be the most dangerous of the all for your pocket book. These highly unregulated lenders do provide a valuable service – if you need cash now, you can get it for a fee and a promise to repay the amount once payday comes around. However, the industry standard in annualized interest is between 200 and 500%.
These lenders are able to avoid usury laws by calling their interest charges “service fees” which are not regulated the same way in many places. In fact, payday services have been outlawed or severely restricted in 13 states according to bankrate.com. (Hold too tightly to this rescue line and you'll soon be drowning in debt. Check out Payday Loans Don't Pay.)
- Not Negotiating
This step can be tricky, but it could also save you enormous amounts of money interest. If you are having trouble paying down your debt, call your creditor and ask to have your interest rate reduced. These companies want your business, so often you will be able to negotiate a repayment schedule that can help you pay down your debt faster. Make sure you ask for the lowest fixed rate – an introductory rate that will shoot right back up in a few months will have you back at square one.
Don't be afraid to bring up competitors' rates; your credit card company may be more willing to offer a comparable rate if you can get it somewhere else .If the company will only offer you a lowered rate for a set amount of time (usually six months to a year), that is better than nothing. The best part about this step is that there is no harm in asking, only the potential for big savings. (Reducing the rate charged on your credit card balance is the first step to getting out of debt. Check outCut Credit Card Bills By Negotiating A Lower APR.)
- Ignorance is NOT Bliss
The worst culprit for keeping you in debt is not knowing where your money is going. Make it a priority to keep records of where and how you spend your hard-earned cash. Make a repayment plan and have set goal-dates for paying off debts. Without these tools, it's far too easy to stay in debt. You can purchase accounting software, make a simple (and free) spreadsheet on your computer or even work it out with a pen and paper; just make sure you make a long-term plan for regaining control of your finances.
Debt may seem like a life sentence, but it doesn't have to be. The number one tip for maintaining financial health is awareness. Be aware of your money and where it goes each month, and be aware of the options available to you. There are easy ways to help alleviate the stress on your finances and move from red to black, and the rewards are more than just monetary. (Want to stay in the black permanently? Read Can You Live A Debt-Free Life?)
Posted: August 21, 2009 11:36AM by Matrika
Source: Investopedia.com
माईक्रोसफ्ट र याहू मिलेर अनलाइन खोज तथा विज्ञापन को कार्य सयुंक्त रुपमा गर्ने कुरामा सहमती भएका छन। यो सयुंक्त व्यापर ले पर्तिद्दन्दी गूगल लाई चुनौती को बिषय हुने छ। 29/07/09 Reuters
Plutonomy
Economic growth that is powered and consumed by the wealthiest upper class of society. Plutonomy refers to a society where the majority of the wealth is controlled by an ever-shrinking minority; as such, the economic growth of that society becomes dependent on the fortunes of that same wealthy minority.
This buzz word was initially coined by analysts at Citigroup in 2005 to describe the incredible growth of the U.S. economy during that period despite increasing interest rates, commodity prices and an inflated national debt. Citigroup analysts argued that as such an economy continues to grow in the face of contradictory elements, the more important the society's ultra rich become to maintaining such growth. The analysts also believed that in addition to the U.S., Canada, Great Britain and China are also becoming plutonomies.
Call Ratio Backspread
A very bullish investment strategy that combines options to create a spread with limited loss potential and mixed profit potential. It is generally created by selling one call option and then using the collected premium to purchase a greater number of call options at a higher strike price. This strategy has potentially unlimited upside profit because the trader is holding more long call options than short ones.
An investor using this strategy would sell fewer calls at a low strike price and buy more calls at a high strike price. The most common ratios used in this strategy are one short call combined with two long calls, or two short calls combined with three long calls. If this strategy is established at a credit, the trader stands to make a small gain if the price of the underlying decreases dramatically.
Intrapreneur
An inside entrepreneur, or an entrepreneur within a large firm, who uses entrepreneurial skills without incurring the risks associated with those activities. Intrapreneurs are usually employees within a company who are assigned a special idea or project, and are instructed to develop the project like an entrepreneur would. Intrapreneurs usually have the resources and capabilities of the firm at their disposal. The intrapreneur's main job is to turn that special idea or project into a profitable venture for the company.
Coined in the 1980s by management consultant Gifford Pinchot, intrapreneurs are used by companies that are in great need of new, innovative ideas. Today, instead of waiting until the company is in a bind, most companies try to create an environment where employees are free to explore ideas. If the idea looks profitable, the person behind it is given an opportunity to become an intrapreneur.
Takeover Artist
An investor or company whose primary goal is to identify companies that are attractive to buy and that can be turned around to make a profit. A takeover artist will usually use a lot of debt (leverage) to make the purchase, and restructure the company for resale or add the company to an existing group of companies.
Takeover artists are also sometimes referred to as corporate raiders. Frequently, the reason for a takeover is to remove entrenched management that the corporate raider believes is incompetent. For example, in the 1980s, Carl Icahn (a well-known takeover artist), launched a takeover of Trans World Airlines and turned the company from an unprofitable company to a profitable one in a few short years. He took the company from a loss of $193 million in 1985 to a profit of $106 million in 1987, and $250 million the next year. However, it was short-lived, as Trans World Airlines posted a $298 million loss in 1989.
Rose-Colored Recession
The unexpected optimism market observers sometimes experience during a recession. A rose-colored recession reflects the sometimes unwarranted positivity of the general public following news or data released during a recession; it is still considered bad news, but is better than expected.
The term rose-colored recession was coined during the financial crisis of 2008-2009 in reference to optimism shown by market observers and government officials following bad economic data, such as corporate earnings announcements and unemployment numbers, that were "not as bad as feared" or "bad, but not that bad". Quite often these events led to bear market rallies and predictions of an end to the recession.
Uneconomic Growth
When economic growth produces negative external consequences to the extent that the growth is unproductive with respect to the broader global systems in which it is viewed. Uneconomic growth occurs at a faster rate than what is considered sustainable. Uneconomic growth studies deal with the negative social and/or environmental impacts of too much growth in a broad economic sense (such as a nation's gross domestic product).
The term was popularized by former World Bank economist Herman Daly in the late 1990s, but the core ideas of unproductive growth have a long and varied history.
Negative consequences include negative impacts to social welfare and environmental damage. These outweigh the short-term value of an extra unit of growth. Uneconomic growth is generally attributed to poor planning, not negative intentions. The term's proliferation has centered mostly on the environmental movement, as data suggests that certain areas of growth, such as an increased use of fossil fuel, has uneconomic consequences.
When a nation increases production at the expense of known damage to the environment, it creates a negative consequence that is felt by not only by that country, but by the entire planet. This same principle can be brought down to the level of a city, company, and even one's own home.
Energy Prices: It depends how you look at it.
It is hard to ignore demand and supply realities in Energy markets when trying to anticipate what move will be coming in the next couple of weeks.
It is hard to ignore demand and supply realities in Energy markets when trying to anticipate what move will be coming in the next couple of weeks. These are indeed still not supportive of a sustained rally, akin to what we have been accustomed over the past couple of years.
Further negative developments in US retails sales and a possible correction in equities looming, doesn’t really help matters either.
The increase in production surplus capacity is also not supportive of a sustainable rally in Crude oil. Crude Oil stocks are at present approximately 15% higher than cyclical highs in previous years. The global recession is putting a serious break in demand side potential, reflected in the fact that the Energy Information Agency (EIA) once again revised its annual demand projections lower for 2009. We must bear in mind that the entire rally of last year towards $140.00 came at a time where we based production capacity running at just under 99%. In the current state of affairs, we are able to produce at a higher surplus, and at the same time global demand is diminishing.
And we need also recall, whereas supply side concerns were the main driver upwards, demand side uncertainty could be the catalyst for lower Crude prices. This can by enlarge be seen by lower levels of retail and commercial consumption, which at a ‘Macro’ level, is all pretty clear and straight forward.
But if we are to break down the energy markets into further components, there are some interesting observations to be made. One interesting development is in especially gasoline prices as they continue to move higher, as we continue to see draws in inventories. Many energy traders examine what are known as “Crack Spreads” to gauge relative differences in the Energy products, and possibly also find alternative trade strategies.
The “Crack spread” is oil industry and futures trading terminology for the price differential between crude oil and petroleum products. In other words, it is also perceived to be the profit margin that oil refineries can expect to make by "cracking" crude oil into individual saleable components.
The benchmark Crack spread as recovered 55%-60% of the losses seen in Energy markets since its falls from the highs last year. To put this into context, Crude prices has still has only recovered approximately 25%, it paints a far more constructive picture of the energy markets, in general. It also puts the energy market in the context of its individual constituents, rather than simply trying to benchmark all against where WTI Crude is moving this week. So one positive note in energy could be that, even in the light of falling retails sales and consumption, gasoline seems to be adding support to the energy product, in its entirety.
If we then reflect back on Crude stocks and demand, then it is not supportive of a further rally above $60.00 in the near term.
On the contrary, we are more likely to see a correction in the market, targeting $50.50 by the end of next week. Most traders will not be waiting that long to cut their losses, though, as $55.50 will be critical and below which we might see an aggressively liquidating market. The market technical’s also put WTI into and overbought area.
The past weeks negative price action, puts Crude into territory where losses are highly probable, and momentum indicators beginning to show signs that directional change is in the pipeline.
That taken into consideration, the more constructive approach to price development as reflected through the Crack, could also stop any prolonged move lower in time to come, as the entire energy product begins to show signs of resilience and support.
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US Regional Equity Daily |
| 977-01-4782056 |
Thursday, May 14, 2009 | | |
| Market comment |
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|
US indices continued to consolidate driven by profit taking in the real estate, banks and insurance sectors. On the economic front, April retail sales less autos fell 0.2% (+0.2% expected) after a revised 1.2% decline in March (-0.9% initially).
European markets continue their consolidation and US futures call for a stable start. | |
|
| Economic releases |
|
US 08:30: W18 Initial Jobless Claims (Thsd): 610
US 08:30: APR Producer Price Index (MoM): 0.2%
US 08:30: APR PPI - Ex Food & Energy (MoM): 0.1% | |
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| Corporate events |
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Results
Wal-Mart (WMT): Q1 ($0.85)
Dividends
United Parcel Service (B) (UPS): $0.45
| | |
| INDICES |
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| Dow Jones Fut. (60min) |
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Our Preference: SHORT positions below 8360 with targets @ 8210 & 8160.
Alternative scenario: The upside penetration of 8360 will call for 8455 & 8530. |
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Last |
%Day |
%5D |
%1M |
|
Fair Value |
| Dow Jones |
8285 |
-2.18 |
-2.67 |
4.61 |
Dow Jones JUN 09 : 8261 |
-20,5 |  |
| Nasdaq 100 Fut. (60min) |
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Our Preference: SHORT positions below 1365 with 1335 & 1320 in sight.
Alternative scenario: The upside breakout of 1365 will open the way to 1390 & 1400. |
| |
Last |
%Day |
%5D |
%1M |
|
Fair Value |
| Nasdaq 100 |
1340 |
-2.73 |
-5.90 |
1.33 |
Nasdaq 100 JUN 09 : 1345 |
-0,2 |  |
| S&P 500 Fut. (60min) |
|
Our Preference: SHORT positions below 895 with 877 & 870 in sight.
Alternative scenario: The upside breakout of 895 will open the way to 902 & 916. |
| |
Last |
%Day |
%5D |
%1M |
|
Fair Value |
| S&P 500 |
884 |
-2.69 |
-3.87 |
5.04 |
S&P 500 JUN 09 : 882 |
-1,5 |  | | |
| SAXO'S FAVOURITE STOCKS |
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| Stock |
Ticker |
Last |
%Chg |
ST trend |
MT trend |
Sup 3 |
Sup 2 |
Sup 1 |
Res 1 |
Res 2 |
Res 3 |
Event |
| AIG |
AIG |
1.6 |
-11.60 |
 |
|
0.75 |
0.96 |
1.17 |
1.91 |
2.07 |
2.46 |
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| Ford Motor |
F |
4.96 |
-1.00 |
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|
2.5 |
3.05 |
3.6 |
5.35 |
5.74 |
6.72 |
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| General Electric |
GE |
12.91 |
-5.63 |
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9.8 |
10.5 |
11.3 |
13.8 |
14.3 |
15.6 |
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| General Motors |
GM |
1.21 |
5.22 |
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0.44 |
0.58 |
0.72 |
1.47 |
1.6 |
1.91 |
below lower BBand |
| IBM |
IBM |
102.26 |
-1.62 |
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91.3 |
93.9 |
96.4 |
104.7 |
106.5 |
110.7 |
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| STOCKS TO WATCH |
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| Selection of stocks likely to move on an intraday basis within the Nasdaq 100 and/or Dow Jones Industrial Average. |
| Alcoa (AA) |
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Our preference: as long as 9.25 is a resistance, a decline towards 8.45 and even 8.15 seems likely.
Alternative scenario: a break above 9.25 would invalidate our bearish scenario. The stock could then rise to 9.9. |
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| American Express (AXP) |
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Our preference: as long as 25.6 is a resistance, we are bearish with a target at 22.4.
Alternative scenario: a break above 25.6 would open the way to 27.3. |
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| TECHNICAL ALERTS |
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| They are based on mathematical indicators and can be used to determine change of trend or market acceleration. They are based on the following indicators: 20D & 50D moving average, 20D Bollinger bands, 14D RSI and MACD. |
| Bullish alerts |
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| Name |
Ticker |
Last |
%Chg |
Signal |
| Baxter Internati. |
BAX |
50.98 |
-0.49 |
MACD zero line crossover |
| Campbell Soup |
CPB |
27.01 |
-0.37 |
MACD zero line crossover |
| Colgate Palmoliv. |
CL |
64.14 |
1.07 |
Upper Bollinger crossover |
| Covidien |
COV |
35.40 |
1.93 |
Upper Bollinger crossover |
| Merck |
MRK |
25.67 |
2.76 |
50D MA crossover |
| Pepsico |
PEP |
49.66 |
0.79 |
20D MA crossover |
| Pfizer |
PFE |
15.27 |
2.28 |
Upper Bollinger crossover |
| Schering Plough |
SGP |
23.40 |
1.47 |
MACD signal line crossover |
| Wyeth |
WYE |
44.56 |
0.23 |
Upper Bollinger crossover |
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| Bearish alerts |
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| |
| Name |
Ticker |
Last |
%Chg |
Signal |
| 3M |
MMM |
56.94 |
-4.35 |
MACD signal line cross under |
| Alcoa |
AA |
8.63 |
-8.77 |
20D MA cross under |
| Avon Products |
AVP |
22.43 |
-1.58 |
20D MA cross under |
| Baker Hughes |
BHI |
36.42 |
-3.40 |
MACD signal line cross under |
| Bank of New York. |
BK |
27.95 |
-1.69 |
20D MA cross under |
| Caterpillar |
CAT |
36.08 |
-5.20 |
MACD signal line cross under |
| Cisco Systems |
CSCO |
18.05 |
-3.58 |
20D MA cross under |
| Comcast |
CMCSA |
14.96 |
-1.58 |
20D MA cross under |
| Costco Wholesale |
COST |
45.65 |
-2.69 |
20D MA cross under |
| Dell Computer |
DELL |
10.94 |
-2.41 |
20D MA cross under | | |
| CANDLESTICK PATTERNS |
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| They can provide a good indication of investor psychology at a certain time. Some patterns can consist of one or a combination of candles and can be used to spot reversal patterns. |
| Bullish Patterns |
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| |
| Name |
Ticker |
Last |
%Chg |
Candlestick |
Inv. |
| Bank of New Y. |
BK |
27.95 |
-1.69 |
Inverted hammer |
27.76 |
| ConocoPhillip. |
COP |
44.60 |
-1.91 |
Inverted hammer |
44.46 |
| General Dynam. |
GD |
55.30 |
0.00 |
Hammer |
53.51 |
| Pepsico |
PEP |
49.66 |
0.79 |
Piercing line |
49.20 |
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| Bearish Patterns |
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| |
| Name |
Ticker |
Last |
%Chg |
Candlestick |
Inv. |
| Amgen |
AMGN |
48.05 |
-0.35 |
Dark cloud cover |
48.27 |
| AT&T |
T |
25.24 |
-1.90 |
Evening Star |
25.90 |
| Bristol Myers. |
BMY |
20.35 |
-0.64 |
Bearish engulfing |
20.53 |
| Burlington No. |
BNI |
66.28 |
-4.62 |
Belt hold - |
68.46 |
| Campbell Soup |
CPB |
27.01 |
-0.37 |
Shooting star |
27.59 |
| Cisco Systems |
CSCO |
18.05 |
-3.58 |
Evening Star |
18.82 |
| Costco Wholes. |
COST |
45.65 |
-2.69 |
Evening Star |
47.25 |
| Devon Energy |
DVN |
62.23 |
-4.06 |
Evening Star |
65.09 | |
| Neutral |
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| |
| Name |
Ticker |
Last |
%Chg |
Candlestick |
Inv. |
| No signal |
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| SECTOR PERFORMANCE VS. S&P 500 |
|
| Find out which ETF sectors are performing the best and worst against the S&P 500. |
| 1 day relative performance (%) |
|
| |
| Sector |
Ticker |
Last |
%Chg |
SPY |
| Health Care |
XLV |
25.50 |
-0.23 |
2.34 |
| Consumer Stap. |
XLP |
22.50 |
-1.83 |
0.70 |
| Technology |
XLK |
16.62 |
-2.52 |
-0.00 |
| Utilities |
XLU |
26.59 |
-2.67 |
-0.16 |
| Energy |
XLE |
48.91 |
-3.31 |
-0.81 |
| Consumer Disc. |
XLY |
22.26 |
-3.51 |
-1.02 |
| Industrial |
XLI |
21.63 |
-4.14 |
-1.66 |
| Materials |
XLB |
25.52 |
-4.33 |
-1.86 |
| Financial |
XLF |
11.39 |
-5.08 |
-2.63 | |
| 5 day relative performance (%) |
|
| |
| Sector |
Ticker |
Last |
%Chg |
SPY |
| Health Care |
XLV |
25.50 |
3.36 |
7.40 |
| Consumer Stap. |
XLP |
22.50 |
0.54 |
4.46 |
| Utilities |
XLU |
26.59 |
-0.49 |
3.40 |
| Energy |
XLE |
48.91 |
-2.90 |
0.89 |
| Materials |
XLB |
25.52 |
-5.93 |
-2.26 |
| Industrial |
XLI |
21.63 |
-6.57 |
-2.92 |
| Technology |
XLK |
16.62 |
-6.58 |
-2.93 |
| Consumer Disc. |
XLY |
22.26 |
-7.90 |
-4.31 |
| Financial |
XLF |
11.39 |
-8.73 |
-5.17 | |
| 1 month relative performance (%) |
|
| |
| Sector |
Ticker |
Last |
%Chg |
SPY |
| Financial |
XLF |
11.39 |
10.05 |
4.67 |
| Energy |
XLE |
48.91 |
8.74 |
3.43 |
| Materials |
XLB |
25.52 |
7.68 |
2.42 |
| Industrial |
XLI |
21.63 |
6.87 |
1.65 |
| Consumer Stap. |
XLP |
22.50 |
5.58 |
0.43 |
| Health Care |
XLV |
25.50 |
5.33 |
0.19 |
| Utilities |
XLU |
26.59 |
4.69 |
-0.43 |
| Consumer Disc. |
XLY |
22.26 |
3.87 |
-1.20 |
| Technology |
XLK |
16.62 |
0.42 |
-4.48 | | |
| STOCK PERFORMANCE IN SECTORS |
|
| Find out which stocks are performing the best and worst within the ETF sectors. |
| 1 day relative performance (%) |
|
| |
| Health Care |
Ticker |
Last |
%Chg |
vs Sector |
| Merck |
MRK |
25.70 |
2.76 |
3.00 |
| Pfizer |
PFE |
15.30 |
2.28 |
2.52 |
| Boston Scientifi. |
BSX |
8.70 |
-3.77 |
-3.55 |
| Tenet Healthcare |
THC |
2.40 |
-5.62 |
-5.40 |
| Financial |
| Chicago Mercanti. |
CME |
274.00 |
6.04 |
11.72 |
| First Horizon Na. |
FHN |
11.30 |
0.90 |
6.30 |
| Huntington Bancs. |
HBAN |
4.40 |
-14.86 |
-10.31 |
| Genworth Financi. |
GNW |
4.20 |
-20.80 |
-16.56 | |
| 5 day relative performance (%) |
|
| |
| Health Care |
Ticker |
Last |
%Chg |
vs Sector |
| Aetna |
AET |
26.50 |
11.10 |
7.49 |
| St Jude Medical |
STJ |
37.80 |
10.25 |
6.66 |
| Perkinelmer |
PKI |
16.40 |
-3.99 |
-7.12 |
| IMS Health |
RX |
12.60 |
-6.26 |
-9.31 |
| Financial |
| Fifth Third Banc. |
FITB |
7.00 |
33.00 |
45.73 |
| Huntington Bancs. |
HBAN |
4.20 |
8.92 |
19.35 |
| Keycorp |
KEY |
5.70 |
-26.53 |
-19.50 |
| Cb Richard Ellis. |
CBG |
7.00 |
-26.55 |
-19.52 | |
| 1 month relative performance (%) |
|
| |
| Health Care |
Ticker |
Last |
%Chg |
vs Sector |
| Tenet Healthcare |
THC |
2.40 |
72.79 |
64.05 |
| Intuitive Surgic. |
ISRG |
152.00 |
28.50 |
22.00 |
| Biogen Idec |
BIIB |
48.50 |
-5.77 |
-10.54 |
| IMS Health |
RX |
12.60 |
-8.38 |
-13.02 |
| Financial |
| Genworth Financi. |
GNW |
4.20 |
103.43 |
84.86 |
| Fifth Third Banc. |
FITB |
7.00 |
95.00 |
77.19 |
| Cit Group |
CIT |
2.90 |
-25.00 |
-31.85 |
| Keycorp |
KEY |
5.70 |
-31.10 |
-37.39 | | |
| |
|
| Foreign Indices |
|
| |
| |
Last |
%Day |
%5D |
%1M |
| FTSE 100 |
4335 |
0.09 |
-1.44 |
8.68 |
| Dax 30 |
4692 |
-0.75 |
-2.33 |
2.97 |
| Cac 40 |
3130 |
-0.73 |
-3.74 |
4.32 |
| SMI |
5312 |
0.66 |
-0.26 |
4.17 |
| Nikkei 225 |
9094 |
-2.64 |
-3.11 |
2.84 | |
| Forex |
|
| |
| |
Last |
%Day |
%5D |
%1M |
| Euro Dollar |
1.3544 |
-0.42 |
1.15 |
2.14 |
| Dollar Yen |
95.37 |
-0.06 |
3.94 |
3.79 |
| Crude Oil |
57.07 |
-1.64 |
0.64 |
8.66 | | |
|
|
Source: Saxo Bank
ECB having a hard time getting its story straight on quantitative easing. Inflation watchers look to tomorrow's US CPI.
MAJOR HEADLINES – PREVIOUS SESSION
- Switzerland Apr. Producer and Import Prices out at -0.2% MoM and -3.6% YoY vs. +0.8%/-2.8% expected, respectively
- Sweden Apr. Average House Prices fell to 1.765M from 1.808M in Mar.
- US Apr. PPI out at +0.3% MoM and -3.7% YoY vs. +0.2%/-3.7% expected, respectively
- US Apr. PPI Ex Food and Energy out at +0.1% MoM and +3.4% YoY as expected
- US Weekly Initial Jobless Claims out at 637k vs. 601k expected
THEMES TO WATCH – UPCOMING SESSION
- New Zealand Mar. Retail Sales (2245)
- Japan Mar. Machine Orders (2350)
- Japan Apr. Domestic CGPI (2350)
Market Comment:
The weekly US jobless claims disappointed after last week's slightly lower data perhaps raised hopes that the pace of job losses was slowing. No such luck this time around, unfortunately. If we study the last two jobless claims/unemployment rate cycles, we can see that while jobless claims peaked in late 2001 with another small surge in early 2002, the unemployment rate did not peak until mid 2003 - a 15-18 month lag. In the early-90's recession, the weekly claims peaked dramatically in early 1991 while the unemployment rate peaked in mid-1992 - also an approximate 15 month lag. If that pattern holds true this time around, then a sharp fall in claims in coming months would mean a peak in unemployment in late 2010 - but at what level? Even a slowdown to 0.2% average increase in unemployment vs. recent increases of 0.4% or more for the last five months in a row for only a year would mean an unemployment rate of 11.3% - easily eclipsing the early 80's high water mark of 10.8%. Worse still, the real job market is already far worse than it was then in terms of underemployment.
The ECB is apparently having a hard time coming to agreement over the scope of its asset purchase scheme - and ECB officials are contradicting one another in their public statements, something that must be giving Trichet fits. Super-hawk Weber was out yesterday saying that EUR 60 billion would be the maximum for covered bond purchases and that no other asset purchase types would be necessary while Kranjec of Slovenia contradicted this explicitly with claims that the ECB would likely spend more than the EUR 60 billion already earmarked and that commercial paper and corporate bond purchases might also be a possibility. Clearly, the ECB is at odds and if things stay that way, the policy efforts from the ECB will be muddled and slow in coming. This could mean that Euro growth will strongly underperform in coming quarters if some of the "green shoots" or at least "decelerating contraction" we are seeing in the UK and the US, for example, are mostly due to those country's enormous bailout efforts and frantic money-printing. Exhibit A for this theory will be the Q1 GDP numbers from Germany tomorrow, though the Q2 numbers are where this development might be more evident.
Bonds rallied again today, though US treasuries failed to hold their new lows in yields as we are writing this. Still, EURJPY posted an impressive new low below 129.00 overnight and AUDJPY spiked to new lows as well with JPY positive factors everywhere in evidence. It is interesting to note that a EURUSD decline has not accompanied the sharp EURJPY sell-off of recent sessions. These two pairs have often moved in the same direction in recent months. If the correlation is to hold, then EURUSD should be vulnerable if EURJPY continues to sell off (if EURJPY is the leading pair, that is...) Either that, or we need to come up with a reason for the two pairs' divergence soon. In the chart below, EURJPY is the blue line and EURUSD is the red one.
AUD has managed to stage a strong comeback after posting sharp new lows in Asia and in Europe, but that comeback should find very strong headwinds, perhaps ahead of the recent 0.7700+ top, as long as metal prices (like copper, especially) are selling off and as long as equity averages are in the dumps. Still, market turnarounds don't happen all at once even if we view AUDUSD as toppish.
Inflation watchers didn't get much from today's US PPI data and will have to look at tomorrow's CPI data for more clues. The core data is not likely to show any surprise downticks for the April data. There is an extraordinarily perverse calculation that makes up a good chunk (about 25%) of the core CPI called Owner's Equivalent Rent (OER) This number inflates as natural gas prices fall as the geniuses calculating this index figure that if people are paying less for their gas, they can pay more for their rent. April saw a further sharp drop in the natural gas price (natural gas has moved from 11 dollars last July to as low as 3.5 dollars in April), which will continue to inflate the core above what it otherwise might have been. For May, however, gas prices rose, so the effect will be the opposite and we wonder if relatively stable to rising gas prices could finally allow the core CPI to show a string of deflationary readings for month-on-month data by the early fall for the first time in over five decades of data. Regardless of the "official" numbers, other analysts have noted that if the CaseShiller home price data were to be substituted for the OER, we would already be seeing strong deflationary data for months...
Source: Saxo Bank
Sugar No. 11
A futures contract for the physical delivery of raw cane sugar. The Sugar No.11 contract includes shipping costs to the purchaser's ship at a port inside the country selling the sugar, a type of shipping called free on board. One Sugar No.11 contract represents 112,000 pounds of raw cane sugar.
This contract is considered the benchmark for trading raw sugar around the world. The quality that is acceptable for delivery is raw centrifugal cane sugar based on 96 degrees average polarization. This just means the sugar has been processed through a centrifuge in a certain way.
Gharar
An Islamic finance term describing a risky or hazardous sale, where details concerning the sale item are unknown or uncertain. Gharar is forbidden by the Quran, which explicitly forbids trades that are considered to have excessive risk due to uncertainty.
There are strict rules in Islamic finance against transactions that are highly uncertain or may cause any injustice or deceit against any of the parties.
In finance, gharar is observed within derivative transactions, such as forwards, futures and options, in short selling, and in speculation. In Islamic finance, most derivative contracts are forbidden and considered invalid because of the uncertainty involved in the future delivery of the underlying asset.
Uptick Rule
A former rule established by the SEC that requires that every short sale transaction be entered at a price that is higher than the price of the previous trade. This rule was introduced in the Securities Exchange Act of 1934 as Rule 10a-1 and was implemented in 1938. The uptick rule prevents short sellers from adding to the downward momentum when the price of an asset is already experiencing sharp declines.
The uptick rule is also known as the "plus tick rule".
The SEC eliminated the rule on July 6, 2007, but in March of 2009, following a conversation with SEC Chair Mary Schapiro, Rep. Barney Frank of the House Financial Services Committee said that the rule could be restored. Frank's conversations were spurred by a call for the return of the rule by several members of Congress and legislation reintroduced on January 9, 2009, for its reinstatement. On April 9, 2009, the SEC approved the release of five proposals for reinstating the uptick rule, which will each be put out for a 60-day public comment period.
By entering a short sale order with a price above the current bid, a short seller ensures that his or her order is filled on an uptick. The uptick rule is disregarded when trading some types of financial instruments such as futures, single stock futures, currencies or market ETFs such as the QQQQ or SPDRs. These instruments can be shorted on a downtick because they are highly liquid and have enough buyers willing to enter into a long position, ensuring that the price will rarely be driven to unjustifiably low levels.
Deep Out Of The Money
An option with a strike price that is significantly above (for a call option) or below (for a put option) the market price of the underlying asset. To be deemed deep out of the money, an option's strike price should be at least one strike price below/above the market price of the underlying asset's option chain.
For example, if the current price of the underlying stock is $10, a put option with a strike price of $5 would be considered deep out of the money.
While a deep of out the money option seems worthless, the derivative still holds some value. All options, both in and out of the money, contain time value. Time value measures the benefit of having an option with time remaining until maturity. So, while a deep out of the money call or put has no intrinsic value, some investors may be willing to pay a small amount for the remaining time value. However, this time value decreases as the option moves closer to its expiry date.
Death By A Thousand Cuts
A failure that occurs as a result of many smaller problems. Death by a thousand cuts could refer to the termination of a proposed deal as a result several small issues, rather than one major cause. It could also apply to a product or idea that is destroyed by too many minor changes or the failure of any other plan as a result of a cumulative chain of events.
This buzz word is derived from the idea that a small cut will not kill you, but if you get enough of them, you could bleed to death. The term is derived from an ancient form of torture, in which the condemned person was subjected to a number of less devastating wounds over time until the accumulation of damage eventually became fatal.
Fuzzy Logic
A mathematical logic that attempts to solve problems by assigning values to an imprecise spectrum of data in order to arrive at the most accurate conclusion possible. Fuzzy logic is designed to solve problems in the same way that humans do: by considering all available information and making the best possible decision given the input.
Fuzzy logic is often applied by advanced trading models/systems that are designed to react to changing markets. The goal of this type of system is to analyze thousands of securities in real time and to present the trader with the best available opportunity.
Bullet Dodging
A form of option granting in which the award of options is delayed until a piece of bad news becomes known to the public and the stock's price falls. Because an option's strike price is often determined by what the underlying stock's price is on the grant date, waiting for the stock price to drop allows option holders to gain some additional benefit in the form of a lowered strike price.
For example, suppose that XYZ Corp. had planned to grant stock options for its CEO on May 7, 2007. However, XYZ Corp. is going to release its earnings a week later, on May 14, and it is believed that the earnings will be under guidance. Because the company didn't meet its earnings projections, the share price will likely drop. Moving the option-granting date to May 15 is likely to cause the option's strike price to be lower compared to if the grant date had been on May 7.
This practice is fairly controversial, as some feel that bullet dodging may be a form of insider trading because the option holder, who is usually a member of the company's management, will benefit by using information that is not available to the public.
Fugit
The amount of time that an investor believes is left until it would no longer be beneficial to exercise an option early, or the likelihood that an American-style option will be used before it expires. The fugit concept was named and created by Mark Garman, a Berkeley professor who studied the optimal time for exercising an American option using binomial trees.
Unless an option is deep in the money, it should not be exercised early because this causes a loss of inherent value. Some investors find it profitable to exercise call options early when they are in the money or right before an ex-dividend date.
Plain Vanilla
The most basic or standard version of a financial instrument, usually options, bonds, futures and swaps. Plain vanilla is the opposite of an exotic instrument, which alters the components of a traditional financial instrument, resulting in a more complex security.
For example, a plain vanilla option is the standard type of option, one with a simple expiration date and strike price and no additional features. With an exotic option, such as a knock-in option, an additional contingency is added so that the option only becomes active once the underlying stock hits a set price point.
The owner of a stock that can't be sold. The term stuckholder has a negative connotation, usually because the value of the stock is dropping and circumstances prevent the owner from liquidating the position.
The Securities and Exchange Commission (SEC) can suspend trading on a stock to protect investors or the public. For example, if a company does not file the correct reports in a timely and accurate manner, the SEC can put a hold on trading for up to 10 days. Once trading resumes, the stock tends to automatically fall in value due to the uncertainty associated with the violation. Stuckholders are stuck with this position when trading is suspended, even though they know that the value of the stock will drop.
A type of exotic option that consists of a call option on a put option. Essentially, a caput gives the holder the right to purchase another option. This type of option is also known as a "compound option"
The holder of a caput option has the right to purchase a specific put option in the event that the price of the underlying asset declines. The disadvantage of a caput option is that it only trades over the counter, so it is not as easy to get into a position with caput options as with regular vanilla options.
A slang term used to describe someone considered to have bad luck with stock picking. Coolers are usually blamed for the poor performance of a stock after they have either purchased or recommended those shares.
The term "cooler" has been used to describe individuals who are perceived to have bad luck, and who transfer that luck to others. Some superstitious investors believe that equities tend to perform poorly once purchased by a cooler, and that performance rebounds when the cooler sells his or her shares. Many television and digital media analysts have been referred to as coolers following the poor performances of companies to which they had previously given "buy" ratings.
An investment wherein the payout comes after an election, based on the winning party. Investors pay a flat fee to purchase the future and will receive $100 if the candidate they chose wins, and $0 in the event of a loss. The price of the future fluctuates throughout the election, based on candidate support.
The purchase price for the future is based on the probable outcome of the election. If candidate A is expected to win, the price for the future will be higher than it would be for candidate B. This essentially means, like any investment, the riskier the investment, the higher the payoff.
A plan unveiled by the Obama administration in April, 2009, that was designed to stabilize the U.S. economy during the financial crisis of 2008-2009. The Financial Stability Plan (FSP) promised to take measures to solidify the American banking system, securities markets, mortgage and consumer credit markets. This somewhat controversial plan came as a response to the 2008 fallout in the mortgage and financial markets.
A plan unveiled by the Obama administration in April, 2009, that was designed to stabilize the U.S. economy during the financial crisis of 2008-2009. The Financial Stability Plan (FSP) promised to take measures to solidify the American banking system, securities markets, mortgage and consumer credit markets. This somewhat controversial plan came as a response to the 2008 fallout in the mortgage and financial markets.
इरोपको अर्थतन्त्र अझै नाजुक भएको सन्केत गर्दै पहिलो त्रैमासिक पारीणाम अनुसार इटली र फ्रान्समा औधोगिक उत्पादन घटेको छ। फ्रान्स को उत्पादन १।४ प्रतिशत र इटलिको ४।६ प्रतिशतले घट्यो। 11/05/09 - Bloomberg
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